2024 (4) TMI 416 - HC - GST

Cancellation of GST Registration retrospectively - Validity Of Show Cause Notice, does not bear the date and time whereby the Petitioner was required to appear for personal hearing - not considered by the Proper Officer - No longer continuing business - HELD THAT - Pursuant to the said impugned order, Petitioner filed an application dated 24.06.2021 seeking revocation of cancellation of GST registration. On the said application, Petitioner was issued a Show Cause Notice dated 19.07.2021 for rejection of application for revocation of cancellation of registration. It merely stated The reasons entered for revocation of cancellation is not appropriate. We notice that Show Cause Notice and the impugned order are also bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed, and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Although, we do not consider it apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. In view of the above that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 16.06.2021 is modified to the limited extent that registration shall now be treated as cancelled with effect from 31.12.2019. i.e., the date when the Petitioner discontinued his business. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017 Petition is accordingly disposed of in the above terms.

Summary

Issues:
The issues involved in this case are the retrospective cancellation of GST registration and the lack of proper notice and opportunity for the petitioner to object to the cancellation.

Retrospective Cancellation of GST Registration:
- The petitioner's GST registration was cancelled retrospectively from 25.05.2018, and a Show Cause Notice was issued on 06.04.2021.
- The petitioner had applied for cancellation of registration on 07.01.2020 due to the closure of business.
- The impugned Show Cause Notice did not specify the date and time for the petitioner's personal hearing regarding the cancellation.
- The order for cancellation stated that the online reply submitted by the dealer was not relevant, leading to the retrospective cancellation.
- The petitioner contended that a detailed reply to the Show Cause Notice was not considered before the cancellation order was passed.
- The court emphasized that registration cannot be cancelled with retrospective effect mechanically and must be based on objective criteria, not merely due to non-filing of returns.
- The court modified the cancellation date to 31.12.2019, aligning with the date when the petitioner discontinued business activities.

Lack of Proper Notice and Opportunity:
- The petitioner was not informed about the retrospective cancellation possibility, depriving them of the chance to object.
- The impugned Show Cause Notice and order lacked details and reasons for the retrospective cancellation, rendering them unsustainable.
- The court highlighted that proper steps, including a Show Cause Notice and an opportunity for hearing, should be taken for any recovery of tax, penalty, or interest due from the petitioner.

This judgment clarifies the importance of following due process and providing adequate opportunities for affected parties in cases of GST registration cancellation. It underscores the necessity for objective criteria and proper communication in such decisions to ensure fairness and compliance with the law.